Land Value Taxation will solve many of the 21st century's most serious social, economic and environmental problems, and promote justice, fairness and sustainability. We CAN have a world in which all can prosper.
Progress and Poverty, by Henry George Here are links to online editions of George's landmark book, Progress & Poverty, including audio and a number of abridgments -- the shortest is 30 words! I commend this book to your attention, if you are concerned about economic justice, poverty, sprawl, energy use, pollution, wages, housing affordability. Its observations will change how you approach all these problems. A mind-opening experience!
Henry George: Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth ... The Remedy This is perhaps the most important book ever written on the subjects of poverty, political economy, how we might live together in a society dedicated to the ideals Americans claim to believe are self-evident. It will provide you new lenses through which to view many of our most serious problems and how we might go about solving them: poverty, sprawl, long commutes, despoilation of the environment, housing affordability, wealth concentration, income concentration, concentration of power, low wages, etc. Read it online, or in hardcopy.
Bob Drake's abridgement of Henry George's original: Progress and Poverty: Why There Are Recessions and Poverty Amid Plenty -- And What To Do About It! This is a very readable thought-by-thought updating of Henry George's longer book, written in the language of a newsweekly. A fine way to get to know Henry George's ideas. Available online at progressandpoverty.org and http://www.henrygeorge.org/pcontents.htm
Where Else Might You Look?
Wealth and Want The URL comes from the subtitle to Progress & Poverty -- and the goal is widely shared prosperity in the 21st century. How do we get there from here? A roadmap and a reference source.
Reforming the Property Tax for the Common Good I'm a tax reform activist who seeks to promote fairness and reduce poverty. Let's start with the enabling legislation and state requirements for the property tax. There are opportunities for great good!
I wonder if Morgan the Pirate,
When plunder had glutted his heart,
Gave part of the junk from his ships he had sunk
To help some Museum of Art;
If he gave up the role of "collector of toll" And became a Collector of Art?
I wonder if Genghis the Butcher, When he'd trampled down nations like grass.
Retired with his share when he'd lost all his hair, And started a Sunday school class;
If he turned his past under and used half his plunder In running a Sunday school class?
I wonder if Roger the Rover,
When millions in looting he made,
Built libraries grand on the jolly mainland
To honor Success and "free trade;"
If he founded a college of natural knowledge Where Pirates could study their trade?
I wonder, I wonder, I wonder,
If Pirates were ever the same,
Ever trying to lend a respectable trend
To the jaunty old buccaneer game;
Or is it because of our Piracy Laws That philanthropists enter the game?
—Wallace Irwin, in Life. -- reprinted in The Painter and Decorator, a union journal, 1907
The post below this one, "Mitt Romney's 'Fair Share' " refers to his fair share of the costs of providing public goods.
But perhaps an equally important question is the nature of one's fair share of the output of our economy and the output of the earth. Some of the former output is the result of individual efforts, and one ought to be able to keep that portion. But at the same time we must recognize how much comes from the division of labor, from drawing down on the non-infinite supply of non-renewable natural resources on which all of us today must depend and on which future generations of human beings must rely. Those who draw down more than their legitimate share owe something to the rest of the community. Our wealthiest tend, we suspect, to use many, many times their legitimate share, and the median American likely draws far more than their share, when one considers the planet as a whole.
Perhaps "legitimate" is not the right word here. It refers to what is permissible under current law. (The word gets misused a lot -- see the discussion on "legitimate rape," which seemed to be about the circumstances under which a woman has a right to make a specific very personal, decision, and when it is considered by some to not be left to her and is the province of government, legislators or others.)
What is one's "fair share" of natural resources? America is using a hugely disproportionate share of the world's resources. Are we entitled to it because we're somehow "exceptional"? Because "our" God is somehow better than other nation's Gods? Or do we genuinely believe that all people are created equal, and intend to live our lives accordingly?
Our output of greenhouse gases exceeds our share of the world's population. This is not without consequences for the world, and for peace on earth.
We ought to be re-examining our incentives so that they move us in the direction we ought to be going, which is, to my mind, using less. We can build transportation infrastructure which will permit many more of us to move around with less impact on the environment. We can fund that through collecting the increases in land value that infrastructure creates. We can correct the incentives which cause us to use today's inferior technologies to extract natural resources from the earth in ways which damage the environment, as if ours was the final generation, or the only one worth serious consideration.
Better incentives could reduce, eliminate, even reverse urban sprawl. I refer specifically to land value taxation as a replacement for the existing property tax, particularly in places where assessments are for one reason or another not consistent with current property values -- e.g., California and Florida, parts of Delaware and Pennsylvania which currently use assessments from the 1970s, and many other places where assessments are simply out of whack with current reality!) We should be replacing sales taxes, wage taxes, building taxes with taxes on land value and on natural resources. Most of that value is flowing generously into private or corporate pockets, to our detriment. It concentrates wealth, income, and, of course, political power.
Collecting the rent, instead of leaving the lion's share of it to be pocketed by the rent-seekers, would go a long way to making our society and our economy healthier. Eliminating the privilege of privatizing that which in a wisely designed society would be our common treasure would make our society a better place in which to live, a place in which all could thrive and prosper without victimizing their fellow human beings.
It is well known that these materials and agencies, as fast as they become available, are in the main appropriated by individuals, through the agency or consent of the government, and are then held as private property. Such is the case with the soil and the minerals beneath it. The owners of this property charge as much for the use of it as if it were their own creation, and not that of nature.
— PROF. SIMON NEWCOMB, The Labor Question, North American Review, July, 1870, p. 151.
As our time honored political maxims become hackneyed they are very apt to pass into what Grover Cleveland would call innocuous desuetude. We subscribe to the sentiment that "eternal vigilance is the price of liberty" and yet little is done to counteract those aggressive forces which nullify that freedom which we profess to prize so highly. Even the prayer, "Thy Kingdom Come," is repeated as a mere wish that something good would happen rather than with a determination to bring about those righteous conditions which make for a heaven on earth. Possibly the most neglected of all of our national ideals is our professed adherence to that most democratic of all maxims, "Equal rights for all and special privileges for none." For at the present time our country is honeycombed with special privilege that has become so entirely entrenched as to be regarded on all sides as vested right. Special privilege is condoned by force of its familiarity. Like vice it is endured, then pitied, then embraced.
There lived in a Colorado city years ago a housewife who made convenient use of coal cars on the side track across the street from her dwelling with which to replenish her stock of fuel. This she did without any qualm of conscience but as a special privilege which, by the sanctifying touch of time had grown into a vested right. This woman doubtless was punctilious in the ordinary obligations of life and would have hotly resented any statement to the effect that she was stealing coal. She was guided by that all too common kind of honesty which is based upon expediency rather than principle. Not on any account would she have withheld what was due from her to a neighbor who would have suffered by her delinquency, but the advantage to her of getting this coal was so great and the loss to some impersonal owner of same, mine, railroad, or smelter, was relatively so negligible that the argument was all in favor of her acting in her own interest without question. No personal equation was involved and if at first there had been any hesitation on her part of this practice, that was long ago a thing of the past. But the railroad company put a watchman on guard and her supply of fuel was thereby stopped. She then turned to the local charity organization with request for a continuation of the supply which had thus been rudely taken from her and the very righteous indignation with which she told her story was ample proof of entire absence of comprehension on her part that she had been stealing.
This incident, which is a true story, illustrates very nicely the evolution and the nature of that special privilege which eventually becomes a vested right. And if the searchlight of analysis is turned upon our social system we may be surprised to find the presence of special privilege in unexpected places and of a volume that is, in the aggregate, enormous.
As a basis for this inquiry it may be well to state the fundamental truth that property may be secured in three ways only; first, by labor; second, by gift; and third, by theft. If this test is repeatedly kept in mind, the task will become easier. One of the commonest forms of special privilege is that which is provided under ninety-nine year leases on valuable business property sites. These leases convey to the owner of the land a stipulated income after the tenant has paid all taxes and expenses. In the parlance of political economy this revenue consists of what John Stuart Mill defined as unearned increment, a value which is produced by no individual but which is purely the result of population reflected upon desirable locations. For this revenue to be turned over to individuals as is now the unquestioned custom in all of our large cities and to an amount of billions of dollars annually is a procedure which is precisely in the same class as the stealing of coal from the railroad car by the Colorado housewife.
A much larger source of public revenue which is diverted to individuals is that of the rent of valuable property in excess of a fair interest return upon the intrinsic value of improvements on the property. This applies to practically all property located at the center of our large cities and involves enormous revenues. There is a mixture here of legitimate return on capital invested with the unearned increment which belongs absolutely to society but the case is not less clear on that account.
Another prolific source of public revenue which is diverted to individuals is that which comes from the lucky possession of oil wells. This possession frequently gives incomes of thousands of dollars daily to those who have no more claim on such revenue than is involved in the possession of the land upon which the wells were developed. The wealth that has by this means been given to certain sections of the country and certain groups of people has run into the billions of dollars. The Osage tribe of Indians in Oklahoma are said to have been made the richest people in the world due to this special privilege. Such beneficiaries are no more justly entitled to the revenue which they receive than was the Colorado woman justified in stealing coal from the railroad car. It will be said that the oil industry involves a great deal of capital and that many dry wells are paid for before a single producing well is developed. This is true and therefore makes the proposition somewhat more complicated but does not alter the conclusion.
Another source of revenue which diverts public funds into private hands is speculation in land. Purchase of inside property sure to increase in value is the one investment that has been invariably recommended by shrewd financiers. This speculation is far greater than has been generally realized. More than one-half the area of New York City consists in vacant lots which are held out of use for speculative purposes, and the same is true of all our larger cities. Incidentally, this speculation has the effect of enhancing the selling price of desirable land to artificially high figures. When land which is purchased with a hope of subsequent rise in value, the investor practically lays a trap by which he may secure values that rightfully belong to the community. And this process makes an artificial scarcity of land with consequent artificially high cost to those who must use it. This process of securing a profit, of getting something for nothing, is persistently the same in character as that by which the Colorado housewife secured her supply of coal. Here again objection may be interposed to the effect that land frequently has to be sold for less than it cost. This is an objection that was raised by no less an economist than Francis A. Walker, the foremost critic of Henry George during his lifetime. General Walker exclaimed, "Mr. George has much to say about unearned increment: He says nothing, however, about unrequited decrement." Mr. George's rejoinder to this was an expression on his part of his inability to discuss the problem with one who spoke of unrequited decrement in something which originally had no value. In other words, so far as society is concerned its interest is only in the rental value which is produced from year to year and which rises or fall accordingly as population grows or wanes. The important fact is that this increment, whether large or small, belongs to the community which produced it.
The most spectacular form of special privilege which we have to deal with today is that provided by the protective tariff. This protection enables the America manufacturer to secure an artificially high price for his product. The common argument in support of the protective system is that the American standard of living must be maintained by this artificial means, but this argument falls to the ground, if at the same time, we permit any improvement in labor-saving machinery which naturally has far greater effect upon the labor market than is produced by the competition of merchandise imported from abroad. The enormity of special privilege due to the tariff is perhaps more conspicuous in the State of Pennsylvania than elsewhere, a single family in Pittsburgh, the direct beneficiaries of the tariff on aluminum, being reputed to be worth in excess of $2 billion. There will be found that, with a few rare exceptions, the great fortunes of America are based upon special privilege of one kind or another.
Although there are many minor sources of special privilege which are embedded in our political and social institutions, those above enumerated are the principal ones.
The special privileges provided by legislative action at Washington are in a different class from those which have become a regular part of our system of taxation but are none the less to be condemned. The most flagrant of these in recent times was the appropriation by Congress and approved by President Hoover, of $500,000,000 of tax payers' money for the specific purpose of stabilizing or artificially enhancing the price of wheat, cotton, and other farm products. It was presumed by the makers of this law that it would have the effect of giving artificial advantage to the farming class, which would offset in a measure the special privileges which had been given so generously to Eastern interests by means of the protective tariff. The plea for this farm legislation was repeatedly based upon that consideration. It so happened that even the immense waste of money involved by the farm marketing act was negligible as an influence in the world wide markets and that it did not affect in any considerable degree the law of supply and demand upon the prices of the agricultural products which were supposed to be favored. But the very fact that this legislation was put through with little opposition furnished a very good illustration of the fact that special privilege legislation is regarded as perfectly legitimate. And this has been further illustrated in monstrous degree by the New Deal legislation under President Roosevelt.
There is everywhere consciousness of a mysterious force which is responsible for easily acquired fortunes on one hand together with an increase of unemployment and consequent lower incomes on the other hand. Each succeeding census report makes more appalling this undemocratic and unjust condition in our social fabric.
If prosperity is to be secure, there must be an end to special privilege of every kind, and a system of taxation inaugurated in place thereof which shall be based upon justice to all. Henry George has demonstrated how this should be done.
38. Mining companies which mine on public lands pay far less to the Federal government than they pay on privately held lands.
A. That's fair, because the private landholders are better negotiators
B. That's fair, because the 1872 Mining Act set the price, and it wouldn't be fair to change the business environment after setting the rules.
C. That's fair. Corporations need subsidies to create jobs.
D. That's unfair, and the federal government should be getting just as much from the miners as the private landholders are getting
E. That's unfair, and not only should the federal government be getting more from the mining companies, but the federal government should be collecting a significant portion of the royalties now privatized by private and corporate landholders, since we're all equally entitled to nature's bounty. This would permit us to reduce other taxes on wages and production, and perhaps lead to a citizen's dividend, similar to the Alaska Permanent Fund
F. That's unfair, because the 1872 Mining Act was based on old prices and old mining technology.
A. Don't worry about that. Our children should pay for it, and their children if necessary, with interest accumulating. The economy will grow sufficiently that it will not unduly burden them.
B. We should pay for it via federal taxes on wages.
C. We should pay for it via a federal tax on sales (or consumption).
D. We should pay for it via a federal tax on land value; people and corporations (domestic or foreign) who own land in midtown Manhattan or downtown Los Angeles would pay a lot; those who own rural property would pay little or nothing. Tenants' rents -- residential, commercial, agricultural -- would cover their share, and be collected from landlords.
E. We should pay for it via royalties on non-renewable natural resources. (Whose natural resources? from U.S. soil? from Afghanistan soil? other?)
9. The corporations which pump oil from beneath federal lands are paying low royalties into the federal treasury, despite the fact that the price of oil has risen significantly since their royalties were set. The royalties should be raised. To whom should the revenue go?
A. The Roman Catholic Church, the Southern Baptist Church, the Methodist Church, the Episcopal Church, the LDS Church, the orthodox, conservative, and reform bodies of Judaism, the American Islamic governing entity, etc., in proportion to their proven membership. Further provision should be made to insure that those who belong to no religious group can name an entity which should control their share.
B. Keep giving it to the corporations, but increase their corporate income taxes. Or reduce their loopholes.
C. Use the revenue to fund education, providing all children the same amount of funding, to be used at any school their parents choose.
D. Use the revenue to fund education, providing all children some funding, but more for those in poverty or handicapped, autistic, special needs, gifted.
E. Create a national version of the Alaska Permanent Fund, to provide, over the decades, an income to every American.
F. Use the revenues to reduce other taxes which burden the economy, and most particularly those which burden the poor most heavily.
G. Give the revenues to the people of the states where the oil is pumped. They're more entitled than the rest of us.
H. Use oil royalties to fund wars overseas, particularly those which relate to oil.
I. Use oil revenues to finance health care, or fund Social Security.
8. The corporations which pump oil from beneath federal lands are paying low royalties into the federal treasury, despite the fact that the price of oil has risen significantly since their royalties were set. Should their royalties be raised?
A. No. A deal is a deal, and those corporations made their business plans in good faith. The spoils belong to them. They can sell those rights to whomever they choose to, at whatever price they can get, for the benefit of their shareholders and their management.
B. Yes. All persons have equal rights to the gifts of nature.
C. Yes. The resource is finite, and the oil companies don't create it.
D. Yes. We can now see that we will be running out of oil, and the price is rising, for reasons that have nothing to do with the oil companies.
4. Oil and natural gas are pumped from the Gulf of Mexico and along our ocean coasts by corporations large and small. (Mason Gaffney points out that Harry Truman increased the size of the US by more than any other president by expanding the coastal zone, but that we collect little revenue from the natural resources drawn therefrom.) How much should the oil companies pay the federal government?
B. Just the amount negotiated in 1996. We can't change the rules just because the price of these commodities has risen rapidly.
C. A fixed and trivial percentage of the value of the oil.
D. A rising percentage of the value of the oil and gas, related to the retail prices of the products.
E. An amount that is based both on a percentage of the value of the oil and gas and on the amount of carbon produced by burning the finished product.
3. Oil and natural gas are pumped from federal lands by corporations large and small. How much should the oil companies pay the federal government?
B. Just the amount negotiated in 1996. We can't change the rules just because the price of these commodities has risen rapidly.
C. A fixed and trivial percentage of the value of the oil.
D. A rising percentage of the value of the oil and gas, related to the retail prices of the products.
E. An amount that is based both on a percentage of the value of the oil and gas and on the amount of carbon produced by burning the finished product.
F. An amount that relates to the medium- to long-term scarcity of these natural resources, so that we have incentives to leave more for future generations, who may develop technologies to use them more efficiently or extract them with less harm to the environment.
While I'm glad to see our troops coming home from Iraq, I think we ought to be very conscious that our spending large amounts of money there is continuing. I think it is fair to assume that the private contractors have large amounts of corporate or "small business" profits built into their invoices to we-the-people.
We're paying for their pensions, their life insurance, their health care, and their not-trivial "wages." The lowest-paid contractors are probably receiving wages approaching those of mid-level military, and benefits far superior. Their management is likely taking home compensation many times what we pay our President.
I realize that some will think this is a fine thing, but I submit that its costs to our society are non-trivial.
Sometimes public employees are the best people for the job. There is a lot less fat in our military than there is in private-sector substitutes.
Let's not fool ourselves about Iraq.
"Out of sight, out of mind" sometimes gets translated by the naive as "blind and crazy."
Daddy Warbucks. Daddy "peace"bucks?
We ought to be getting a monthly accounting of the dollars flowing, and to whom they are flowing.
I have a family member who, when Herman Cain says "9-9-9," plays a sound bite of another voice shouting "nein! nein! nein!"
Georgists have a better proposal for how we ought to fund our common spending.
0% tax on wages
0% tax on sales
0% tax on corporate profits
0% tax on buildings and equipment
100% recovery of our commonwealth
This probably raises several questions in your mind:
what is "recovery of our commonwealth"?
how will it affect me?
Our commonwealth includes the value of land -- not the improvements made by the present or previous owner, but the value of the site itself, which is created by the gifts of nature; by the investment of the local, state and national communities in public goods and services (including most "pork"); by the presence of the community and its economic activity. While good farmland may be worth $5,000 or $10,000 per acre, depending on climate and proximity to markets, suburban residential lots might be $35,000 to $1,000,000 -- or far more! -- per acre, and an acre in midtown Manhattan can be worth $250,000,000 or more. The landholder doesn't create that locational value.
Our commonwealth includes the value of ecosystem services. It includes the value of electromagnetic spectrum (the airwaves which most people would agree rightly belong to the American people, not to corporations). It includes the value of water, particularly fresh water for drinking and water for irrigating crops and for corporate use. It includes the value of government-granted privileges. It includes the value of geosynchronous orbits -- those parking spots in space for satellites whose owners and customers would not want to see crashing into each other. It includes the value of landing rights at busy congested constrained airports, such as LaGuardia or JFK, particularly at their rush hours. It includes the value of scarce on-street parking in congested cities. It includes the value of nonrenewable natural resources extracted from below the earth and the oceans, for 200 miles beyond our land borders. It includes a whole range of other similar things.
As you look at that paragraph, compare it to the 0-0-0-0 list above, and notice that it collects upfront certain values, and leaves the rest to those who produce. It is direct taxation rather than indirect, and one could reasonably argue that it isn't even really taxation; rather it is more in the nature of a user-fee.
It is Natural Public Revenue.
Once one has sat with this idea for a while, it seems quite unnatural to permit the value to continue to accrue to private individuals, or to corporations publicly or privately owned, or to entities other than the community as a whole!
Recall how concentrated wealth is in the US: The 2007 SCF [the Federal Reserve Board's Survey of Consumer Finances] reported that aggregate net worth is "distributed" as follows:
Top 1% of us have 33.8%
Next 4% of us 26.6% [cumulative: 60.4%]
Next 5% of us 11.1% [cumulative: 71.5%]
Next 40% of us 26.0% [cumulative 97.5%]
Bottom 50% of us 2.5%
Recall also that the Forbes 400 families are specifically and intentionally omitted from the SCF, and that Forbes estimates that they represent 2.5% of aggregate net worth. So add that 2.5% to the numerator and denominator. And note, as Michael Moore did, that it is very similar to the value of the Net Worth of the bottom 50% of us.
And it seems quite unnatural to tax wages, and sales, and corporate profits, and buildings at all before we've fully collected Natural Public Revenue.
Will Natural Public Revenue be sufficient to meet all the needs of all levels of government?
Quite possibly not, at least today when we are so reliant on a social safety net because current conditions have kept a significant share of our people from providing well for themselves. But I regard it as altogether possible that within a generation or two, it could be quite sufficient, in part because it would have the effect of redistributing some of the wealth which today is pouring into the pockets of a relative few of us.
How much of corporate profits are coming from (quite legal) privatization of the value of natural resources, the value of being able to get away with polluting air, water and soil, and the value of other privileges which corporations -- public and private -- are used to enjoying? One of the interesting findings in the SCF is that the value of privately held businesses [BUS] actually exceeds the value of publicly held ones [EQUITY] in household wealth -- and the value of both is highly concentrated:
Consider, too, how much more of this value the Forbes 400 have! These two categories represent 21.2% and 23.1% of aggregate net worth held by the rest of us -- a total of 44.3%. Most of the 2.5% is likely in these two categories. I'll leave the math to you.
Some people think that land rents are not a significant percentage of GNP, or, when they hear "land reform," think only about agriculture, probably in the context of Third World latifundia.
If you believe that land rents don't matter in a modern economy, I have a wonderful get-rich-quick scheme for you! And I won't charge you a cent for my brilliant idea, so listen up!
I was looking at the real estate ads in the Washington Post (October 2, 2010, p. F1), and I observed that for just $271,000, you can buy a four bedroom, three bath contemporary chalet in Basye/Bryce Resort, Virginia, with screened porch and hot tub. It looks pretty nice, it has trees in the yard, and it was built in 2005. I'm not sure just where Bryce Resort is, so it must not be too close to DC, or I'd know more.
Other houses are more expensive. There's a three bedroom townhome (what used to be called a row house) in Alexandria, less than a mile from the Huntingdon Metro, for $579,000, more than twice as much, $308,000 more. Alexandria is on the Potomac, across from Washington DC.
What else can you buy? There's a three bedroom townhouse in Alexandria, for $642,800. There's also a white house, described as a 1920's classic, with the number of bedrooms unspecified, but a yard and landscaping of its own, for $1,250,000, nearly a million dollars more than the chalet in Bryce Resort. It looks attractive, but it's not a huge mansion. When I was a child, say in 1975, I think you could have bought a house like that in my home town for under $50,000, $60,000 at most.
So how do you get rich quickly? You buy houses in Bryce Resort, of course, and sell them in Alexandria at a $300,000 markup! Even after the costs of cutting up houses and moving them on flatbed trucks, you should come out way ahead. Buying and selling one house a year should give you a middleclass income, and if you work faster than that, you'll soon be set to retire rich.
Can anyone consider the obvious flaw in this scheme, and not realize that land prices matter? Land prices in Alexandria must be at least $300,000 for the land under a decent townhouse, more for the land portion of a home with a nice yard. Annual land rents must be about $10,000 or more for modest lots, several times that for bigger ones. This is not a trivial percentage of homeowners' incomes, or of GNP.
As a 19th century Georgist put it, instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?
Every week when I scan the NYT's "What You Get" column, which showcases three homes currently on the market in various parts of the country, I wonder why the column doesn't provide the answers to the important questions?
How far is each home from a vital job market?
What share of the children in the local school district graduate from high school? attend 4-year colleges? graduate from college?
What sort of public goods and services and cultural amenities does the community offer?
Must those who live there have a car for every working adult?
I think Nicholas Rosen nailed it when he quoted a 19th century Georgist: instead of paying rent to a landlord and tax to the state, why not pay rent to the state and no taxes?
Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.
It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.
The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.
What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.
Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due.
This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.
THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.
I think Robert Reich sees part of the problem, but he doesn't see the solution. How do we achieve more widely shared prosperity? By a variation on Alaska's theme. In Alaska, a significant share of the value of the state's natural resources is used to fund state government, and another significant share is placed each year into the Alaska Permanent Fund, which is invested in a broadly diversified portfolio and pays an annual dividend of $1000 to $2000 to every permanent resident of Alaska, of all ages. [See http://www.nytimes.com/2010/09/04/us/politics/04alaska.html for an article mentioning this, and the Alaska Permanent Fund link, at the left of this page.] Alaska has it half right: they collect a decent share of the value of the natural resources, but they don't tax their land value much.
How do we share the prosperity beyond the top 10%? By shifting our incentives so that those who currently grow wealthy in their sleep by collecting economic rent find themselves sharing that rent with the rest of us. Untax wages, starting with incomes under the median. Untax sales. Untax buildings. Tax land value. Tax the value of those things which the classical economists would have recognized as land -- water rights, "rights" to pollute, airport landing rights at congested airports, geosynchronous orbits (which prevent satellites from bumping into each other), electromagnetic spectrum (those airwaves which most people would say "belong to the American people" but which we have permitted corporations -- public and private -- to privatize), natural resources such as oil, natural gas, copper, coal, lithium, etc.. All these things are going into corporate portfolios (here and abroad -- and some of those corporations are families in power, despite attempts at nation-building), week in and week out, and their value accrues to the shareholders of the corporations. Stock ownership is quite concentrated, and these benefits flow into the pockets of a relative few, who, as Reich rightly points out, may or may not spend or invest in America's products. When they do invest, they often acquire our best land and resources, buying thereby the labor of thousands of Americans. When an acre in Manhattan can be worth $400 million, the seller of that land didn't make it valuable. WE did! So why should an individual, or a corporation, or a trust, or a university, or a pension fund -- or any private entity -- get to pocket that value as if they did? (The kindest thing I can say is that we have a bad habit! Something like chattel slavery -- and look at how long it took us to end that.)
Pocketing that value has two sorts of effects: when they sell, they pocket that so-called "capital" gain. It isn't capital! It is land value! Capital depreciates; what rises in value is land, and it rises for reasons which have nothing at all to do with the "fellow" who owns it.
But even when they buy and hold, there are important effects of permitting that privatization. The rich don't need to put the land to its highest and best use, because they can get by with something less while they wait for the community to cause it to grow. (See The Taxpayer at 72nd and Madison. Notice all the surface parking lots in Manhattan, Philadelphia, Hartford and many other cities. See the 4.3 acre "hole in the ground" in Stamford, CT, right near the city's 100% location, vacant since the early 1980s.) They're patient! They can afford to be. The top 10% of us hold 71.5% of the chips, according to the 2007 Survey of Consumer Finances.) Not using the land well reduces the supply of housing close to the center of things (adding to sprawl) and/or of jobs (which we say we want) and contributes to a wide range of our most serious social, economic, environmental and justice problems.
If we collected more of the annual rental value of our urban land, the holders of that land would turn into active users or sell it to someone who would put it to good use. Good use creates jobs, and homes and other things that the market wants. But when the market can't afford them, it does without. People are priced out of housing in the places they'd prefer to live. They lack jobs or are underemployed, and the rich keep getting richer.
Reich advocates extending the EITC, exempting the first $20,000 of wages from payroll taxes, improving and extending early childhood education, making public universities free in return for 10% of the first 10 years of full-time earnings, creating "earnings insurance." He concludes,
Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession.
OUR CONCLUSIONS point to a solution. It is so radical that it will not be considered if we believe less drastic measures might work. Yet it is so simple that its effectiveness will be discounted until more elaborate measures are evaluated. Let us review current proposals to relieve social distress. For convenience, we may group them into six categories:
1. More efficient government 2. Better education and work habits 3. Unions or associations 4. Cooperation 5. Government regulation 6. Redistribution of land
That 10% of us who hold 71.5% of the net worth also received 41.3% of the current income. [Note that these percentages are understated, since the SCF purposely omits the Fortune 400 families. They hold about 1% of the nation's net worth.]
Picketty & Saez provide annual updates on income concentration. For 2008, they report that the top 10% of us (sorted by income, not net worth) received 45.60% of the income when capital gains are excluded and 48.23% of income including capital gains. (For 1988, the corresponding figures are 38.63% and 40.63%; in 1958, 32.11% and 33.56%. Do we notice a trend here? Do we like it or think it a healthy trend?)
We have permitted and supported a structure which funnels wealth and income into relatively few pockets. We have to reform this structure, and we have to recognize that the current beneficiaries are not likely to be keen on reform -- conservatives have a lot to conserve for themselves -- and those who are dependent for their salaries on being popular with those beneficiaries are not likely to be particularly interested in looking at the underpinnings of the structure with an eye to removing some of the ladders (escalators!!) or gentling the chutes.
Those who get to privatize the value of what ought to be common assets grow wealthy in their sleep. Until enough of us understand the mechanism to constitute a majority, we aren't likely to correct it.
It is a bit disheartening to think how many well-regarded economists live in California, the land of Proposition 13, and haven't lifted a finger or opened their mouths to suggest that it is not in the best interests of California's people. Milton Friedman acknowledged many times that the tax on land values was the "least bad" tax -- and didn't have anything to say about Proposition 13, which was the antithesis of what a wise person or society would do with that information. So I guess I shouldn't be surprised that today's California economists, with very few exceptions, aren't all that concerned with the economic wellbeing of ordinary people any more than economists elsewhere are. Or maybe, as my late mother would have expressed it, their educations have simply been neglected. (At which point she would proceed to fill in my newly-identified knowledge gap.) Economists can start with the links in this post, and then explore from there.
2010-08-27 Following on from reports today (Friday) that a ‘major’ discovery of oil in the North Sea, Aberdeen North MSP Brian Adam has renewed Prof. Josef Stiglitz call for an Oil Fund. The Nobel Prize winner and former Chief Economist of the World Bank, said on BBC Scotland’s Newsnight programme on Tuesday (24th August) that the UK had “squandered" it's oil wealth and that it is now "imperative" an oil fund is established to secure the wealth that remains under the North Sea for future generations.
The discovery, made by German firm Wintershall yesterday, of up to 100 million barrels of oil would equate to, at today’s oil prize, to over $7billion. This comes just a few short months since the last major discovery in Scottish waters in June, when up to 300 million barrels were discovered by EnCore Oil.
Commenting, SNP Brian Adam said: “The oil industry has contributed a great deal to Scotland, especially in Aberdeen, and it’s showing no sign of drying up despite the pessimistic view taken by the London Parties in the 70’s, which still continues today.
“Over the course of the summer we have seen two major discoveries in North Sea, plus the GERS report which showed that with independence Scotland would see a budget surplus of over £1 Billion, whilst the UK struggles with a mammoth £50 Billion deficit. Even the most hardened unionist cannot deny that the financial case for independence couldn’t be any stronger.
“On Tuesday, Professor Stiglitz said that the SNP was “absolutely right” on the need for an Oil Fund, the UK Government has ‘squandered’ Scotland’s oil, that current situation is unsustainable and that an Oil Fund was now “imperative”.
“The unionist parties must put aside their petty party politics and start putting the interest of Scotland, and it’s people, first before it’s too late.”
THE US and European economies are heading into a long period of weak growth and corrosive unemployment - and imposing a high price on carbon is the best way to resolve the funk, a visiting Nobel prize-winning economist says.
Joseph Stiglitz, a professor at New York's Columbia University, said the spending cuts and budget restraints increasingly being imposed by western governments were likely to prolong the economic stagnation triggered by the financial crisis.
In a speech titled Road to Ruin, Professor Stiglitz used an address at the Australian National University in Canberra last night to warn that the US government as well as many European governments were pursuing misguided policies in an attempt to rein in their debt.
And while Professor Stiglitz was pessimistic about the prospects for the global economy, he said that strong policies to curb carbon emissions could also help restore growth.
''The one basis for a global recovery, I think, is a high carbon price,'' he said. If governments imposed a tough price on carbon, businesses would have greater certainty to invest in new technology, which would drive growth.
Professor Stiglitz said that Australians had not felt the impact of the economic crisis.
''Here in Australia the only major contribution to the financial crisis was the anagram GFC,'' he said.
Almost a month ago (7/12), Martin Wolf, the Financial Times' chief economics commentator, posted a piece to his blog under this title. The last time I looked, perhaps 10 days after his initial post, there were about 150 responses. I circled back recently, and found that the comments count had risen to over 350.
This ended up as a heated debate. Nobody will be surprised if I conclude
that the result of the debate (often surprisingly ill-tempered) was
pro-LVT 10, anti-LVT zero. I am surprised by some of what the anti-LVT
proponents have said. I would have thought they would wish to open their
minds a bit. I did and was persuaded of the case, as a result. Is not
the purpose of such exchanges to learn from one another?
Some of the arguments addressed at the case for LVT are quite extraordinary.
The essential point is quite simple: the value of resources is created
by the economic activity of other factors of production. The owners of
these resources can become hugely wealthy and are often untaxed on that
increase in wealth: the Duke of Westminster is the richest Englishman
simply because he owns a large amount of land in a valuable part of
London. So why should he have command over the labour of so many other
That wealth is, in the strictest sense, unearned. If that rise in wealth
were taxed away, other taxes -- those on labour, capital and
entrepreneurship -- could fall. This would be both efficient (because
taxes on rent do not create distortions, as Ricardo showed) and also
just, because the wealth was unearned. Now, surprisingly, the UK allows
foreign landowners to enjoy the increase in value created by the British
economy, entirely tax-free. This is utterly crazy.
Let me add four other points.
First, throughout history, the main source of wealth was land-ownership.
The parasitic landowner became wealthy on the efforts of others --
peasants, tenants and even developers. Sometimes the parasite was also a
farmer or developer, but that does not change the fact that these are
two distinct economic roles. The parasite built fine castles and palaces
and often sponsored music and culture. But he was still a parasite. The
beauty of capitalism is that many of the wealthiest are no longer
parasites. This is good. But many of the wealthy still are parasites.
Moreover, now everybody wants to get rich by being a mini-landowner.
That is a huge diversion of effort.
Second, the financial system's ills are the result of unchecked
credit-creation. Yes. But unchecked credit-creation would be impossible
without collateral. Land is always the principal form of collateral
(buildings are a depreciating asset). That is why financial bubbles that
do not create credit booms (like the dotcom bubble) are economically
benign, while property bubbles are potentially catastrophic. When the
value of collateral collapses, the financial system implodes.
Third, there is really nothing new about this understanding of the role
of resource rents. They were central to the classical system, from which
modern economics, in its various forms, derives. Ricardo's analysis of
rent remains intellectually impeccable.
Finally, as Herman Daly has noted
(http://steadystate.org/modernizing-henry-george/), today economically valuable
resources are much more than just land (and what lies below it). They
include all the services of the biosphere - those that are appropriated,
those that are appropriable and those that are non-appropriable. If we
do not think seriously and intelligently about how to price resources,
we are likely to go seriously adrift, perhaps even into disaster. Here
land is the least of our problems -- it is appropriable and, by and
large, appropriated. So, at least, the price mechanism works, even
though the distribution of the gain is grossly unjust. But, in other
cases, no appropriation is possible, or at least it is not easy. Nobody
can appropriate the atmosphere. It is nigh on impossible to appropriate
the oceans. How do you own species diversity? These are serious
So, I conclude where I started: resources matter. It was a great mistake
to exclude them from the canonical neo-classical model. It is also a
great mistake not to tax their owners to the hilt.
Public wealth is unearned wealth, found wealth, wealth earned by the public rather than by an individual, or wealth held in common or shared by the public. Public wealth includes rent, monetary expansion, often necessary to prevent deflation caused by population growth or economic growth, and interest charged on rent or monetary expansion. Rent includes wealth found through land value and through the extraction and sale of natural resources. Land value destroyed through the extraction and consumption of non-renewable natural resources or waste disposal can also be considered negative rent.
Private wealth is wealth earned by an individual, either through labor, through the production and use of capital, such as tools, organization, technology, or education, or through interest charged through risking and loaning private wealth to another individual.
This struck me as a short and clear delineation between what is rightly our common treasure and what is rightly the private property of individuals and corporations.
It seems clear what we ought to be taxing -- collecting -- to fund education, to fund infrastructure, to fund all the services which are best funded by all of us. Tax public wealth to the extent that policies give individuals and corporations title to it. Stop taxing private wealth, until we have collected all the public wealth sitting in private pockets. End that free lunch, that windfall.
On the one side are those who believe in democratic capitalism — ranging from the United States to Denmark to Japan. People in this camp generally believe that businesses are there to create wealth and raise living standards while governments are there to regulate when necessary and enforce a level playing field. Both government officials like President Obama and the private sector workers like the BP executives fall neatly into this camp.
On the other side are those that reject democratic capitalism, believing it leads to chaos, bubbles, exploitations and crashes. Instead, they embrace state capitalism. People in this camp run Russia, China, Saudi Arabia, Iran, Venezuela and many other countries.
Many scholars have begun to analyze state capitalism. One of the clearest and most comprehensive treatments is “The End of the Free Market” by Ian Bremmer.
Bremmer points out that under state capitalism, authoritarian governments use markets “to create wealth that can be directed as political officials see fit.” The ultimate motive, he continues, “is not economic (maximizing growth) but political (maximizing the state’s power and the leadership’s chances of survival).” Under state capitalism, market enterprises exist to earn money to finance the ruling class.
The contrast is clearest in the energy sector. In the democratic capitalist world we have oil companies, like Exxon Mobil, BP and Royal Dutch Shell, that make money for shareholders.
In the state capitalist world there are government-run enterprises like Gazprom, Petrobras, Saudi Aramco, Petronas, Petróleos de Venezuela, China National Petroleum Corporation and the National Iranian Oil Company. These companies create wealth for the political cliques, and they, in turn, have the power of the state behind them.
It might be worth looking at these assertions in light of how wealth is distributed ... concentrated might be a better description ... in America. The 2007 Survey of Consumer Finances, from the Federal Reserve Board, reports the following distribution of "Equity," which includes individual stocks and equity mutual funds, whether held in retirement or non-retirement accounts:
Bottom 50% 1.5% Next 40% 19.6% Next 5% 12.4% Next 4% 30.5% Top 1% 36.0%
The SCF also reports the distribution of holdings of "BUS" -- the value of privately-held businesses:
Bottom 50% 0.4%
Next 40% 6.0%
Next 5% 5.5%
Next 4% 25.5%
Top 1% 62.7%
The two categories are of roughly equal size: Equity $13.7 trillion and BUS $14.9 trillion. So one might reasonably estimate that the top 1% have roughly 50% of the aggregate value of these two categories, and the next 4% have about 28% -- leaving 22% for the bottom 95% of us.
If state capitalism puts, say, 80% of business in the hands of the top 5%, is it that much worse than what we've got? In some ways, yes -- but the question is worth pondering.
Brooks closes with this:
We in the democratic world have no right to be sanguine. State
capitalism taps into deep nationalist passions and offers psychic
security for people who detest the hurly-burly of modern capitalism. So I
hope that as they squabble, Obama and BP keep at least one eye on the
We need healthy private energy companies. We also need to gradually move
away from oil and gas — the products that have financed the rise of
aggressive state capitalism.
More than "needing healthy private energy companies" we need to start collecting for the commons more of the value of the natural resources they draw from our common supply -- not to mention forcing them to privatize the environmental risks associated with drilling. Remember what Henry George said about a well provisioned ship? He who controls the hatches controls his fellow human beings.
And of course, we need to be undertaking the shift of incentives which will redirect sprawl into the underused sites in our cities. Land value taxation -- untaxing buildings, and uptaxing land value -- will produce the urban density which will lead to walkable cities and populations which will support effective public transportation systems. It will provide technologically modern housing affordable to people at all levels of the income spectrum, close to their work -- for those who want that. The reduced pressure on the suburban markets will lower prices there, too, for those who want that. That urban redevelopment will also create more commercial venues in the centrally located places where specialized businesses thrive. And of course all that building activity creates jobs, and those new technologies will produce buildings which use less energy and produce less pollution. And because untaxing buildings removes the penalties associated with things like solar power, all the incentives will be pointing in the same direction.
I've not heard any really good answers to this question yet. Which is not to say that I don't think there are answers; they just aren't being widely discussed yet.
The answer lies deeper than the analyses which are commonly discussed. We need to shift our incentive system at a deeper level than what is currently being discussed.
We spend a lot of money heating and cooling older homes many miles from where people actually work. People commute long distances -- most of them via private cars because there aren't viable alternatives. Why do they live so far from their work? Usually because they can't afford to live closer.
The selling price of most housing within a commutable distance of any vibrant city is mostly land value. And most people don't know it.
Let me say that again.
The selling price of most housing within a commutable distance of any
vibrant city is mostly land value. And most people don't know it.
And they don't know why this is so, or realize that there is an alternative which would be desirable from virtually every point of view, or realize the far-ranging ramifications of this reality. And this is as true of people who hold graduate degrees in economics from our best universities as it is of people whose formal education ended with high school.
And the fact that the selling price of a home in a metropolitan area is mostly land value -- not value associated with the current structure -- seems to be invisible to most of us. As are the ramifications of the fact that houses -- like nearly everything else which is manmade -- depreciate! What appreciates is land value -- locational value -- and it appreciates for reasons which have nothing to do with the landholder himself.
The ramifications? I'll list a few here, but the list is very long.
As population grows and more jobs are in cities, population density in the city itself and the closest surrounding suburban rings needs to increase. What might once have served as large-lot single-family housing ought to give way to multi-family housing -- townhouses, low-rises, mid-rises. Vacant lots ought not to remain vacant for long. Low-rise commercial ought to give way to mid-rise commercial, or high-rise mixed use, with retail on the street level and housing or offices above.
More people living in walkable communities, with public transportation to move them to their work, reduces our reliance on cars.
More people living in technologically modern housing reduces the per-person fuel to heat and cool their living spaces.
Incentives which discourage redevelopment of underused sites are counterproductive
Incentives with encourage the prompt redevelopment of well-located sites to their highest and best use will reduce our reliance on oil and other non-renewable natural resources as well as the pollution associated with those fuels.
When we tax land value, we don't take from anyone value which they created.
When we tax land value, we reduce our reliance on income taxes and sales taxes.
When we tax land value, we can reduce our taxation of buildings and other improvements, which reduces the disincentives to redevelopment, to using modern techologies -- both of which create jobs.
When we tax land value, we reduce the selling price of housing, making it more affordable to ordinary people, and requiring them to borrow less. This frees up credit for activity which creates jobs.
When we tax land value, we stabilize our economy, reducing or eliminating the boom-bust cycles which afflict us roughly every 18 years.
(*Quantile is the generic which includes
percentiles, deciles, quartiles, quintiles, and any other aggregation
within a distribution, including small fractions of a percentile. If you're curious about quantiles smaller than the top decile, you can find 2007 data on the top 1%, next 4% and following 5% in Part 1. That's where the action is.)
Chartbook collects the results of the past 7 SCF's. It provides means
and medians for various quantiles and demographics. Each table appears
on its own page, and the Chartbook runs to about 1200 pages. I've
selected a very small number of the pages; the data here comes from two
The data is on Net Worth; that is, the total assets of a
family minus its debts.
Table 1 shows the Mean Value of Net Worth for families with
Notice that the average in the bottom 25% is negative, and that in the
second quarter of families the average
is under $60,000 in 2007. (The mean of any income distribution is
higher than the median: the median represents the middle person or
family -- half have more, half have less. The mean today seems to be
about equal to the 80th percentile, which means that, unlike Lake
Wobegon, most of us are below average. Ironic when you consider that
19% of us consider ourselves to be top 1%ers!)
Table 1: Mean Value of Net Worth for families with holdings (000's of
2007 dollars) by Net Worth Quantile
Quantile of Net Worth
SCF Chartbook, page 73
Multiplying the average holdings per family within each quantile by the
size of the Net Worth quantile, Table 2 shows the relative size of the
holdings of each quantile group:
Table 2: Total Value of Net Worth for families with holdings (2007
dollars) by Net Worth Quantile
Quantile of Net Worth
2007 SCF Chartbook, page 73, and author's calculations. Each quantile
group's mean holdings (see Table 1) is multiplied by the percentage in
that quantile. Thus, the totals from year to year do not reflect
increases in population. Note also that since not all families have
holdings, the value of the bottom quantile's holdings may be overstated!
Table 3 is calculated from Table 2, and shows the shares of aggregate
net worth held by the various
quantile groups. The top 10% of Net Worth holders had 66.8% of the
total Net Worth in 1989; by 2007, their share had risen to 71.5%.
Table 3: Shares of Aggregate Net Worth for families with holdings (2007
dollars) by Net Worth Quantile
Quantile of Net Worth
- 0.5 pts
- 1.8 pts
- 2.4 pts
+ 4.7 pts
source: SCF chartbook,
So how is our middle class* doing? And how are those
whose economic situation can't be stretched to describe them as middle
*See the last paragraphs for why I'm
focusing on Middle Class here.
Let's look at some possible definitions of "middle class," based on Net
Worth holdings (and the SCF data structure):
The Middle Class is the middle 50% of the Net Worth distribution --
those between the 25th and 75th percentiles.
The Middle Class is the 65% of us between the 25th and 90th
The Middle Class is the 40% of us between the 50th and 90th
the Middle Class as the middle 50% of the Net Worth Distribution,
we find that the Middle Class's share of America's Net Worth has fallen
from 15% to under 13%, a decrease of 2.3 percentage points (over 15%).
situation of the bottom 25% has not improved. The Net Worth has flowed
upward over these 18 years.
Table 4: Shares of Net Worth by Net Worth Quantile,
1989 to 2007
Net Worth Quantile
change, 1989 to 2007
- 2.3 pts
+ 2.3 pts
Chartbook, my calculations
the Middle Class as the 65% of us between the 25th and 90th percentiles,
we find that the Middle Class's share of Net Worth has fallen from
33.3% to 28.6% between 1989 and 2007. This is about 14%. All has
Table 5: Shares of Net Worth by Net Worth Quantile,
1989 to 2007
Net Worth Quantile
change, 1989 to 2007
- 4.7 pts
+ 4.7 pts
source: SCF Chartbook, my calculations
3 Defining the Middle Class as the 40% of us between the 50th and
percentiles of Net Worth,
we find that the Middle Class's share of America's Net Worth fell from
30.2% to 26.0%, while the share of the bottom 50% fell from 3.0% to
6: Shares of Net Worth by Net Worth Quantile, 1989 to 2007
Net Worth Quantile
change, 1989 to 2007
- 0.5 pts
- 4.2 pts
+ 4.7 pts
SCF Chartbook, my calculations
The SCF Chartbook provides another set of data points: the median Net
Worth within each quantile -- that is, the situation of the middle
family within each group:
Table 7: Median
value of net worth for families with holdings
Percentile of net
Level (thousands of 2007 dollars)
Among the bottom 25% of us, in 2007, half had total Net Worth of less
than $1,200, and half had more than that. Among the next quarter of
our families, half had total Net Worth of less than $54,300, and half
had more. Among the third quarter of our families, half had total Net
Worth of less than $220,300, and half had more. Among the next 15% of
our families, half had more than $573,800, and half had less. Among the
top 10% of families, half had nearly $1.9 million in Net Worth, and
half had less. As Ed Wolff's work a few years ago pointed out, a
shockingly small portion of American families had sufficient assets,
outside of home equity, to live for even 3 months at the poverty level.
Incidentally -- no, not incidentally -- the fact that I've
focused here on "middle class" does not mean that I am not concerned
with those whose net worth and/or income falls below anyone's definition
of middle class. My focus on various definitions of "Middle Class" is
intended to show that our much-talked-about MC, by any definition, has a
smaller portion of the return on labor than most people seem to
realize. And our underclass has almost nothing, despite many working
long and hard at jobs without which our society could not function. But
it isn't our underclass (sorry -- I don't like that word, but I haven't
found another I like better) that is squeezing our middle class. Wealth
is not flowing down or trickling down; it is concentrating.
Henry George told us in Progress and Poverty, there is an immense wedge being driven through
society. Those above it are buoyed up, those below it are pressed
down. Look at the data here, and see what you think.
I was a rising senior in high school when Woodstock took place. A fellow waitress in the local deli in which I worked -- Max for Snacks, in King of Prussia, PA -- took off for Woodstock, and the rest of us dreamed of doing so.
We thought we could change the world. Many had a vision of a society in which all could prosper, all could succeed. We sang, we danced, we applauded, we protested. Gradually we worked our way up. We educated ourselves, we bought homes, we had children -- not always in that order -- and we became part of the establishment. We bent the establishment, a bit, perhaps, to our advantage.
But we didn't correct the problems, and arguably, we let them grow worse. We watched as the benefits of public investment -- local, muncipal, county, state, federal -- accrued not to all of us but to those who own our land and claim title to our natural resources. We permitted corporations and individuals to lay claim to our common resources, we who grew up hearing about Jed Clampett being somehow entitled to the oil revenue, to the exclusion of the rest of us.
We're so used to the way this aspect of the world was handed to us that few of us think to question it. And yet the privatization of the economic value of urban land and the privilege of collecting the revenue on non-renewable natural resources on which all of us are dependent together produce some of our most serious social, economic, environmental, poverty and justice problems. Most wars are fought over these two things.
And until we come to recognize this, all we can do is put bandaids on those problems -- locally, nationally and globally.
These two things are what someone wisely referred to as "Natural Public Revenue" sources. Yet we largely ignore them, and use taxes which set up perverse incentives -- and wonder why we can't seem to solve any of our biggest problems.
Polly Cleveland (the Georgist who surprised me some years ago when she told me that she'd initially found Progress & Poverty to be a page-turner, a major contrast to my experience on first reading it) sent out this book review this morning, and, with her permission, I am sharing it here.
REVIEW Unjust Deserts : How the Rich Are Taking Our Common Inheritance
and Why We Should Take It Back, by Gar Alperovitz and Lew Daly
Isaac Newton and Gottfried Wilhelm von Leibniz simultaneously invented
calculus in the 1670's. As Isaac Newton wrote, "If I have seen far,
it is because I have stood on the shoulders of giants." Charles
Darwin mulled over the origin of species for 20 years until jolted into
publication by the arrival of a manuscript from Alfred Russel
Great geniuses and great entrepreneurs make the strongest possible case
for outsize rewards based on merit. Yet as Alperovitz and Daly argue,
these giants drew their ideas from society around them. And they were
often very lucky. For almost any modern invention, there are several
potential claimants -- even if only one actually got the
The authors review the writing of a long line of the economists and
philosophers, starting with John Locke, Adam Smith, David Ricardo, John
Stuart Mill and Henry George, through Thorstein Veblen, Edwin Cannan and
Frank Knight to modern economists and philosophers including Robert
Solow, John Rawls and Amartya Sen, as well as economic journalist David
Warsh. From these, they develop three basic propositions:
Locke: that an individual has a right to that which he actually creates
by his own unique efforts.
Second, from Ricardo: the demonstration that
unearned income -- economic rent -- is created not by individuals but by
Third, from Mill and others: the judgment that such
income should belong to society as a whole.
Alperovitz and Daly add their own original fourth proposition: the more
advanced a society becomes, the more each of us depends not only on those
around us but also on those who came before -- and bequeathed to us their
knowledge. Moreover, "this past buildup of knowledge should be
treated as a common inheritance." The wealthier our society
becomes, the less any individual can rightfully claim a large share of
the wealth. That makes our present growing inequality profoundly
Georgists will find this book a treasure trove of arguments and
quotations from scholars, obscure and famous, expressing views similar to
those of George.
in 1854, Scottish philosopher Patrick
Edward Dove wrote that the "principle of allocating the rent to the
community, instead of to individuals" would "secure to every
laborer his share of the previous labors of the community."
And from George's contemporary, Edward Bellamy, "All that a man
produces today more than his cave dwelling ancestor he produces by virtue
of the accumulated achievements inventions and improvements of the
intervening generations together with the social and industrial machinery
which is their legacy."
According to George, wages depend upon the margin of cultivation,
"the highest natural opportunities" open to labor. Drawing from
George, John Bates Clark created his theory that factors of production
receive their marginal product, wages for workers and interest for
capital. (Clark merged land with capital.) But Clark turned the marginal
product argument against George, claiming that workers in fact
deserved what they were paid. Of course Clark ignored George's
central theme: that the margin in turn depends upon the distribution of
land ownership. Alperovitz and Daly add a further rebuttal to Clark,
citing a 1914 article by Walter Adriance, that Clark's error lies in
"not attributing to the cooperation of the rest of the group any
part of the so-called 'marginal product.'"
Alperovitz and Daly offer the usual liberal proposals for income and
inheritance tax reforms, with which I don't disagree. But although they
identify economic rent as rightly belonging to society, and cite George
several times, they suggest no direct strategies for collecting rent for
public purposes. In fact, they even claim "skyrocketing"
property taxes burden the middle class! If we really hope to take back
our common inheritance, we must strengthen the property tax, which is our
original wealth tax. And we must go after rent wherever it pops up -- not
just land titles, but oil leases, broadcast licenses, patents, bank
charters, pollution "rights", fishing quotas, even taxi
I send Econamici--occasional emails with interesting attachments or
links--to friends who are economists or care about economic issues. If
you can't follow a link, I can send you the actual article. Please let me
know if you want to be removed. Past Econamici are posted to
Does this mean that we ought to permit others to trespass against us in a systematic way, in exchange for forgiveness of our own trespasses against other individuals?
Does it mean we ought not to act to end structural trespassing against the basic rights of others: the right to one's fair share of the world's natural resources, including access to land on which to labor?
I wonder how enslaved people viewed this prayer in 18th and 19th century America.
The top 25 entries, whose 2009 holdings range from £10,800m down to £1,400m, include 16 which came from
The combined value of the top 25 fortunes is £73.88 billion. At 5% per year, that produces £3.7 billion in income -- quite a sizable amount to be shared among 25 families! (£1,400m is $2.1 billion US; £3,700m is $5.6 billion US.)
Notice that each of these fortunes is fundamentally from natural resources. Yes, there is capital involved, and labor. But under the laws of most countries, natural resource holdings and extractions are taxed lightly if at all, and labor is taxed heavily.
I'm playing catch-up, after having been occupied with other work for the past month or so, and came across some articles from UK publications listing the sources of wealth for the 2000 or so most wealthy people in the UK.
See a few entries down, where Michael Kinsley laid it out this way in the Washington Post:
Perusing the Forbes 400
list of America's richest people, it's striking how few of them made
the list by building the proverbial better mousetrap. The most
common route to gargantuan wealth, like the route to smaller piles,
remains inheritance. The ability to pass money along to your kids may
motivate many a successful executive or investor to work harder, but it
can't possibly motivate those kids to inherit harder in order to pass
it along once again.
Dozens of Forbes 400 fortunes derive from the rising value of land or other natural resources. These businesses are fundamentally different from mousetrap building. Land does not need to become "better" to increase in value, and that value increase doesn't produce more land.
Yet other fortunes depend directly on the government. The large
fortunes based on health care and pharmaceuticals would not exist if
not for Medicare and Medicaid. The government hands out large fortunes
even more directly in forms as varied as
drilling, mining and mineral rights;
minority small-business loans; and
other special treatment.
We must conserve the earth -- yes. But we must also share its bounty with all, not permit the privatization of that bounty. Henry George put it this way:
We sail through space as if on a well-provisioned ship. If
food above deck seems to grow scarce, we simply open a hatch -- and
there is a new supply. And a very great command over others comes to
those who, as the hatches are opened, are permitted to say: "This is
It is a well-provisioned ship, this on which we sail through space. If
the bread and beef above decks seem to grow scarce, we but open a hatch
and there is a new supply, of which before we never dreamed. And
very great command over the services of others comes to those who as the
hatches are opened are permitted to say, "This is mine!"
In case it isn't obvious, I'm not opposed to fortunes which come from creating better mousetraps! I'm quite in favor of them. But we need to distinguish between what monopoly privilege creates, and what hard work creates, and LVT does that.
The galleys that carried Caesar to Britain, the accoutrements of
his legionaries, the baggage that they carried, the arms that they
bore, the buildings that they erected; the scythed chariots of the
ancient Britons, the horses that drew them, their wicker boats and
wattled houses–where are they now? But the land for which Roman
and Briton fought, there it is still. That British soil is yet as
fresh and as new as it was in the days of the Romans. Generation
after generation has lived on it since, and generation after
generation will live on it yet. Now, here is a very great difference.
The right to possess and to pass on the ownership of things that in
their nature decay and soon cease to be is a very different thing
from the right to possess and to pass on the ownership of that which
does not decay, but from which each successive generation must
To show how this difference between land and such other species of
property as are properly styled wealth bears upon the argument for
the vested rights of landholders, let me illustrate again.
Captain Kidd was a pirate. He made a
business of sailing the seas, capturing merchantmen, making their
crews walk the plank, and appropriating their cargoes. In this way he
accumulated much wealth, which he is thought to have buried. But let
us suppose, for the sake of the illustration, that he did not bury
his wealth, but left it to his legal heirs, and they to their heirs
and so on, until at the present day this wealth or a part of it has
come to a great-great-grandson of Captain Kidd. Now, let us suppose
that some one – say a great-great-grandson of one of the
shipmasters whom Captain Kidd plundered, makes complaint, and says:
"This man's great-great-grandfather plundered my
great-great-grandfather of certain things or certain sums, which have
been transmitted to him, whereas but for this wrongful act they would
have been transmitted to me; therefore, I demand that he be made to
restore them." What would society answer?
Society, speaking by its proper tribunals, and in accordance with
principles recognized among all civilized nations, would say: "We
cannot entertain such a demand. It may be true that Mr. Kidd's
great-great-grandfather robbed your great-great-grandfather, and that
as the result of this wrong he has got things that otherwise might
have come to you. But we cannot inquire into occurrences that
happened so long ago. Each generation has enough to do to attend to
its own affairs. If we go to righting the wrongs and reopening the
controversies of our great-great-grandfathers, there will be endless
disputes and pretexts for dispute. What you say may be true, but
somewhere we must draw the line, and have an end to strife. Though
this man's great-great-grandfather may have robbed your
great-great-grandfather, he has not robbed you. He came into
possession of these things peacefully, and has held them peacefully,
and we must take this peaceful possession, when it has been continued
for a certain time, as absolute evidence of just title; for, were we
not to do that, there would be no end to dispute and no secure
possession of anything."
Now, it is this common-sense principle that is expressed in the
statute of limitations – in the doctrine of vested rights. This is
the reason why it is held – and as to most things held
justly – that peaceable possession for a certain time cures
defects of title.
But let us pursue the illustration a little further:
The online article is titled "Democrats for Rich Heirs?":
But why the populist fury over those AIG bonuses of a few million
dollars while no one seems to care much about billions being
transferred through inherited wealth? The obvious answer -- that
there's a difference between what people do with our hard-earned money
and what they do with their own hard-earned money -- isn't actually as
persuasive as it seems.
Perusing the Forbes 400 list of America's richest people, it's striking how few of them made the list by building the proverbial better mousetrap. The most common route to gargantuan wealth, like the route to smaller piles, remains inheritance. The ability to pass money along to your kids may motivate many a successful executive or investor to work harder, but it can't possibly motivate those kids to inherit harder in order to pass it along once again.
Dozens of Forbes 400 fortunes derive from the rising value of land or other natural resources. These businesses are fundamentally different from mousetrap building. Land does not need to become "better" to increase in value, and that value increase doesn't produce more land. Yet other fortunes depend directly on the government. The large fortunes based on health care and pharmaceuticals would not exist if not for Medicare and Medicaid. The government hands out large fortunes even more directly in forms as varied as
drilling, mining and mineral rights;
minority small-business loans; and
other special treatment.
LVTfan here: The privilege of calling OUR natural resources MINE is a major one, and we're so used to it that we don't even notice it.
The oil revenue (and other like revenue -- see Mason Gaffney's article, The Hidden Taxable Capacity of Land for a listing of some of the things which the classical economists would recognize as land), that currently flows to individuals -- be they Jed Clampetts, or large property owners rural or just choice-land owners urban -- or corporations (ditto!) should be treated as OURS. Then we wouldn't need to tax wages so much -- and maybe not at all.
And we'd all have an equal opportunity under such a scenario.
When I seek a parking spot near my local grocery store, I am brought face to face with a form of sprawl. While I am not one to drive around for long looking for a parking spot (it seems a waste of time and energy), I find myself dealing with a simple form of sprawl: parking spots occupied or blocked by shopping carts. The parking spots can't serve their intended purpose because someone has left behind an underuse.
A few weeks ago there was a brief piece in the NYT Magazine entitled "Gallons Per Mile." It got me thinking; my noodlings follow the article itself:
As gas prices rose earlier this year, consumers started paying a lot
more attention to their cars’ miles per gallon. Good luck with that.
The apparently simple unit of measurement is a highly misleading one,
as two Duke management professors demonstrated in a June issue of
Science. They favor an alternative measure of fuel economy: gallons
consumed per 10,000 miles.
The problem with m.p.g., argues Richard Larrick, who wrote the article
with his business-school colleague (and carpooling partner) Jack Soll,
is that it leads consumers to significantly underestimate the gains in
fuel efficiency that can be achieved by trading in very low m.p.g.
vehicles — even for one that gets only a few more miles per gallon.
Less detrimentally, m.p.g. also misleads people about the fuel savings
achieved by moving from an ordinary family sedan into a Prius.
As we, perhaps, become somewhat more appealing to the other 94% of the globe's residents as a result of the choice the voters made on Tuesday, we still need to consider the question of the rightness and the sustainability of a country which has 6% of the world's people consuming about 25% of the world's resources.
An ambitious new book explains how and why the U.S. is so different from other countries around the world.
“America is indeed exceptional by any plausible definition
of the term and actually has grown increasingly exceptional [over]
time.” This is the conclusion of the editors of a new volume, Understanding America: The Anatomy of an Exceptional Nation (PublicAffairs, $35). At an American
Enterprise Institute conference on April 22, Peter H. Schuck and James
Q. Wilson introduced the collection of essays, which is designed to
probe Alexis de Tocqueville’s observation that America is
“exceptional,” or qualitatively different from other countries. The
book, which examines 19 different areas, marshals the best and most
current social science evidence to examine America’s unique
institutions, culture, and public policies.
During his introductory remarks, AEI president Christopher DeMuth said that no effort to understand the meaning of Americanexceptionalism had been “more ambitious and far-reaching” than this book. Not only does it describe the ways — both good and bad — in which Americans differ from people in other nations, DeMuth said, it also considers whether Americanexceptionalism is likely to continue, and how it matters to the world. DeMuth noted that Americans
are more individualistic, self-reliant, anti-state, and pro-immigration
than people in many other countries. They work harder, are more
philanthropic, and participate more in civic activities. On the
negative side, America also has a higher murder rate than some other
Wilson noted that one of the best ways to understand Americanexceptionalism is to look at polls. Three-quarters of Americans say they are proud to be Americans;
only one-third of the people in France, Italy, Germany, and Japan give
that response about their own countries. Two-thirds of Americans believe that success in life depends on one’s own efforts; only one-third of Europeans say that. Half of Americans, compared to one-third of Europeans, say belief in God is essential to living a moral life.
Three-quarters of Americans say they are proud to be Americans; only one-third of the people in France, Italy, Germany, and Japan say that about their own countries.
Negative views of America in polls today have been shaped by the
Iraq war and by the response to President Bush, Wilson noted, but
criticism of America has a long history, particularly among elites. He
quoted Sigmund Freud as saying, “America is a great mistake.” “Anti-Americanism was an elite view,” Wilson continued, “but it has spread deeper to publics here and abroad.”
Schuck said that Understanding America casts a new light on Americanexceptionalism by examining it at a micro level. He identified seven overarching themes that connect the essays.
(1). American culture is
different. Its patriotism, individualism, religiosity, and spirit of
enterprise make it different. The United States, Schuck said, “is more
different from other democracies than they are from one another.”
(2). American constitutionalism is unique in its emphasis on individual rights, decentralization, and suspicion of government authority.
(3). Our uniquely competitive, flexible, and decentralized economy
has produced a high standard of living for a long time, even though it
now generates greater inequality.
(4). America has been diverse throughout its history. Schuck cited
research by historian Jill Lepore, who found that the percentage of
non-native English speakers in the United States was actually greater
in 1790 than it was in 1990. The thirst for immigration, he said, has
transcended economic booms and busts.
(5). The strengths of civil society here make America qualitatively
different. No other country, he said, allocates as much responsibility
for social policy to the nonprofit sector.
(6). The characterizations of the United States as a welfare-state laggard compared to Europe miss an element of American distinctiveness: its reliance on private entities to provide certain benefits.
(7). We are exceptional demographically with our relatively high fertility rate.
... The editors of Understanding America, Schuck and Wilson,
believe that the “stakes in understanding America could hardly be
higher. For better or worse, America is the 800-pound gorilla in every
room in the world.”
Americans are consuming roughly 25% of the world's natural resources, despite representing only 6% of the world's people. As others see themselves as our equals -- equally entitled to the world's resources, including the carrying capacity of the environment to handle the pollution we spew out, how are we going to reconcile the notion that all men are created equal with their very reasonable expectation that they are equally entitled -- and further, that future generations are entitled to inherit a world that works and a planet with resources available to meet their needs, too -- not to mention, within the US, the younger generation's very reasonable right to not be paying for our generation's wars and mistakes?
And then remember that within the US, the top 1% of wage-earners are getting 12% of wages; the top 10% are getting nearly 36% of wages. When we look at all income excluding capital gains, the top 1% of income recipients are receiving nearly 20% of income and the top 10% are receiving 47% of income. When we look at income including capital gains -- the most inclusive measure -- the top 1% are receiving nearly 23% and the top 10% nearly 50% of income. [Source: Piketty & Saez, 2006 data]
And when we look at the accumulated net worth of Americans, in 2004 the top 1% of wealthholders had over 33% of the net worth; the top 10% of wealthholders held nearly 70% of America's household wealth. [Source: FRB Survey of Consumer Finances, 2004.]
How much of that wealth is created out of thin air, without the use of natural resources? We've learned a bit about assets created from thin air, and we may have reason to worry greatly in coming months about the moods and portfolios of those who invested heavily in hedge funds. But I'm willing to bet that were we to get a new snapshot of the same statistics for, say, October 31, 2008, the wealth concentration would be little a bit higher than 2004's. (The 2007 data will likely be available in January, if previous publication patterns hold.)
Natural resources and resources which are rightly common property -- the economic value of land, of broadcast spectrum, of water rights, of landing rights, of many other like things, which the neoclassical economists would recognize as "land," as opposed to "capital" -- have been privatized -- quite legally -- to produce the wealth and income concentration which America lives with. They've played by the rules -- but the rules aren't just or right. It is time to revise the rules and the structures.
By doing so, we can do something about our excessive use of the world's scarce resources; reduce urban sprawl; shorten commutes; increase urban density; encourage job creation, raise wages, reduce wealth concentration, improve the economy's efficiency, remove much of the deadweight loss, motivate the private sector to provide, at a profit, affordable housing for all. And reduce our overuse of the world's natural resources significantly, making us an example to the rest of the world of what to do and how to do it, rather than the opposite.
Too much to ask of one reform? Too much to ask for? NO!
As I listen to and read about attempts to reduce pollution, reduce reliance on foreign oil, reduce energy usage, I find myself frustrated by the lack of radicalism in the answers people propose. Their answers aren't wrong, but they don't go to the source of the problem, and so merely nibble around the edges. Nibbling is fine and admirable, and definitely has its place. And nibbling will make a bigger difference if they are nibbling at a circumference of 2X instead of X, though a larger percentage difference if we can get to a circumference of X.
The current Vice President asserted a few years ago that the American way of life was non-negotiable.
Well, if that means that what is is good -- the ultimate conservatism -- keep things just as they are because we live in the best of all possible worlds -- or -- it works just fine for my and my kind thank you very much -- a case one might reasonably make if one were in the top 1% of the wealth and income spectra, which, as I frequently mention here, receive a very disproportionate share of the productivity in this country:
The top 1% of income recipients -- and I'm using income excluding capital gains for the moment -- have received 36% of the aggregate income gains from 2000 to 2006.
The next 4% of income recipients have received 17% of the income gains between 2000 and 2006.
The next 5% of income recipients have received 14% of the income gains between 2000 and 2006
The bottom 90% of income recipients have received 33.1% of the income gains between 2000 and 2006.
For comparison: in 2000, the top 1% had 16.5% of the income excluding capital gains; the next 9% had 26.6%, and the bottom 90% had 57.8% of the income; by 2006, the corresponding figures are 18.2%, 27.0% and 54.7%. [Source, my calculations from Tables A1 and A0 of Piketty and Saez's spreadsheet through 2006.]
Is this the non-negotiable American way of life to which the Vice-President was referring? I suspect that, at bottom, it is.
So why should we change anything, if the machine is working so well for those at the top?
So what if this machine uses excessive amounts of the world's natural resources?
So what if it produces more than our legitimate use of the world's carrying capacity for dealing with pollution of air and water?
So what if, in order for us to be rich, others must be poor -- very poor?
So what if, in order to us to continue to drive our cars everywhere we need or want to go, we need to import oil drilled in other parts of the world?
So what if, in order for our powerful to maintain their privileges, we impinge on the rights of our own people, the rights of our contemporaries in other countries, and on the rights of future generations both here and abroad?
Ah - I've not answered the initial question. I'll come back to that in a future post, I guess -- because I think there are some very obvious answers to that question -- obvious to Georgists, anyway -- whose widespread understanding could make a big difference.
A new film entitled The End of Poverty?is making its way around the film festivals. It premiered at Cannes in May, as an Official Selection of the 2008 Cannes Film Festival
as well as an Official Selection at over a dozen international film
festivals. This week, it was shown at Leeds, in the UK. Here's the description from the festival's program:
The End of Poverty? + Oxfam Panel Discussion
The End of Poverty? asks a simple question: ‘with so much wealth in the
world, why is there still so much poverty?’ Looking beyond the popular
‘solutions’, director Philippe Diaz asks if the true causes of poverty
in a modern, globalised world originated in colonial times. From the
barrios of Latin America to the slums of Africa, leading economists,
politicians and activists warn how the developed nations are plundering
the planet at a pace that outstrips its capacity to support life.
Followed by a panel discussion event organized by Oxfam.
Contrary to appearances, Oxfam was not involved in the production of the film, but I'd be very interested to hear about the discussion which followed the film's showing.
The film was financed by the Robert Schalkenbach Foundation, based in NYC, whose mission is to share the ideas of Henry George, known to readers of this blog. (For those who arrived here by searching on the film's title, welcome! Have a look around! And check out this blog's sibling site, http://www.wealthandwant.com/)
Here are comments from two bloggers who saw the film:
Once again, reminding me of one of the first posts I ever made, Leeds
International Film Festival is upon us, with a catalogue full of films
I plan to go and see.
I made a start tonight, with a film from Oxfam: The End of Poverty? I
went keeping in mind that perhaps the bias of the people behind the
film would hinder its objectivity. However, I was pleased to say that I
was presented with a greatly informed account of the events that have
led up to the current, torrid global situation. I feel much less
ignorant for it, and more able to speculate on the worsening future.
Fancyplants' Cracked Pot
My little cracked plant pot. Mind the roots.
Thursday, 6 November 2008 Leeds Film Festival - Day 3
The End of Poverty? (US) (site)
Created in partnership with Oxfam, this film deals with the question of
why, when there is so much wealth in some parts of the world, there is
destitute poverty in so many others. The film works from the time of
the Spanish Conquistadores, who were the first western (labelled
'northern' in the film) power to start carving up the African and Asian
land to invade, colonise and take over. Of course, Britan, alongside
Holland, Portugal, France, Germany, Japan and many others followed and
became owners of the lands that were not the property of anyone, and
the indigenous peoples became part of the deal also. The capitalist
engine thrived upon this influx of cheap slave labour and a culture of
individualism (rather than a community sharing its resources) and
forced Christianity reaped all it could from the soil and the rock of
these countries, leaving the natives with barely anything they could
As time passed and slavery was abolished, the western hunger could not
stop there, and so in a number of repackaging exercises, slavery was
reinvented time and time again, each one requiring a little less work
by the owners and more by the slaves themselves. The slavery continues
in various forms today, often because the country is mired in heavy
debt it can never repay and so is at the mercy of the world bank and
the multinationals who have set up industry, extracting raw materials
and shipping the result back to the 'mother land'. It is this that
leads to the statistic that far more money flows from poor to rich
countries than the other way around.
It is a film packed with insights into how we have ended up in the
situation we are in now, with some countries enjoying prosperity whilst
others cannot seem to progress. It covers such a massive subject very
well, almost like a super-documentary to which all others on the
subject handle but a subset of the problem, and I would recommend it to
anyone remotely curious as to why and how we in the west manage to live
so well. 8/10
Again, Oxfam was not involved in the production of the film (though I'm sure RSF would welcome their interest), and I'd be interested in hearing about the discussion which followed the showing at Leeds. Please post comments!
(I'll be posting more information on the film as time goes on.)
I suspect that many people relate these two words, without quite knowing why. A google alert on the two words brings me 4 to 6 items a day which mention the two words fairly close together. In many the context is "We're making progress against poverty." In others, the context is more like "we're making progress in many areas, but little progress against poverty."
Putting those two words into the search field at Amazon yields these books:
All of these books together can not have come close to the sales of Henry George's 1879 book, Progress and Poverty: An inquiry into the cause of industrial depressions and of increase of want with increase of wealth; the remedy. By the turn of the century, over 6 million copies had been sold, it had been translated into 30 or so languages, serialized in newspapers in a number of countries. [6 million copies would be a large number today ... think of it in 1885!] Today, there are at least two foundations, created by industrialists of another era (using identical language), whose missions are to share Henry George's ideas, as expressed in Progress & Poverty -- the Robert Schalkenbach Foundation (based in NYC) and the Lincoln Foundation (with offices in Cambridge, MA), founded, respectively, by a printer and an electric utility magnate. Joseph Fels, of the Fels Naptha soap company (and brother of the endower of the Fels Planetarium at Philadelphia's Franklin Institute) also devoted much of his mature years to promoting these ideas.
George's Progress & Poverty was the #2 best seller of its decade, second only to the Bible, and the "progress" in its title helped inspire the Progressive movement. Anyone in English-speaking countries who read at all was likely to be familiar with its ideas, and George was an effective speaker who traveled widely. In NYC, he ran twice for mayor; the first time, he lost to Abram Hewitt (the Tammany Hall candidate) in 1886, but beat out the 29-year-old Theodore Roosevelt (whose Bull Moose Party platform about 25 years later looked remarkably Georgist; it is said TR learned his George at San Juan Hill, from a hero who died there); the second time, he died a few days before election day in 1897. His funeral was among the largest ever in NYC. (Search the NYT's free archives for articles.)
So what sets Henry George's Progress & Poverty apart from the other books which mention those two words in their titles? Why did he choose that title? What is the relationship between these two aspects of our society? Is it a necessary relationship, ordained by immutable natural forces or laws of economics, or is it something created by human structures, and therefore something we can alter?
George saw clearly something that others had seen through a glass darkly. He laid it out clearly in Progress & Poverty. Extend your education by reading this book. It will probably change your mind and your vision forever, and if enough of us understand the workings of the poverty machine, we will be able to retool it, and leave our children a better world, and a country which genuinely lives up to its ideals.
Progress and Poverty. You might also want to go read the first essay in George's second book, Social Problems. It is very timely.
But what if our natural resources are in private hands? Are we rich in natural resources if the Jed Clampetts own the land under which our natural resources reside?
Or are we rich in privileged people, whose trickling down the rest of us must be content with?
A significant share of Alaska's oil revenue flows to the state and to the Alaska Permanent Fund because the oil sits under state-owned land. But in the lower 48, our oil is on privately owned property, or under corporate property, and the revenues flow not to the American people, or to the people of one of our states, but to private portfolios.
Is this consistent with the notion that we hold it to be self-evident that all men are created equal? Discuss.
Wow. Here it is. As good a quantification of the distribution of wealth around the world as one could hope for. The study, under the title above, is online here. The authors are James B. Davies, Susanna Sandström, Anthony Shorrocks and Edward N. Wolff.
As the authors note, the concentration of wealth is, if anything, underestimated in the data they start with. The distribution is shown in a couple of different ways.
Table 1 shows the percentages of wealth shown by various quantiles. Let's start with the percentage of wealth held by the bottom 50% of households in selected countries: Australia 9.0% Canada 6.0% China 14.4% Denmark -17.6% (a lot of debt for a lot of people!) Finland 7.4% Germany 3.9% India 8.1% Indonesia 5.1% Ireland 12.2% Japan 13.9% South Korea 12.3% Norway 10.4% Spain 13.2% Sweden -4.8% United Kingdom 5.0% USA 2.8%
Other than two Scandinavian Countries, the US has the lowest percentage of its wealth held by the bottom half of its wealth spectrum. Does this tell us anything about the success of capitalism (as we practice it, anyway) as a tool for sharing wealth justly or logically?
Here are similar figures for the bottom 90% in each country:
Some will try to tell you that stock ownership in America is very broad, and that the middle class is going to be suffering -- as shareholders -- if we don't bail out ... whoever. The oil companies, the banks, etc.
They are telling the truth, sort of. Not the whole truth, of course, but the sort of truth that leads you to the conclusions they need for you to reach. The sort of truth, too, that most of us would like to believe is true.
Much depends on how we define the "middle class." I'm going to pick a definition that I don't think is ideal, but for which the data is readily available. It comes out of the Survey of Consumer Finances, as reported in a Federal Reserve Board Study called Currents and Undercurrents:
Changes in the Distribution of Wealth, 1989-2004. I'm going to define the middle class here as the 40% of us whose net worth places us above the median in net worth, but below the top 10% of the wealth spectrum. By that measure, half of us are below middle class, and 10% of us above it. Here is how aggregate net worth is divided among the three groups:
The next two paragraphs are lifted from another blogpost, still in draft format, but I thought them worth posting separately:
I am led to wonder what the 2008 Christmas shopping season is going to
look like, particularly in the northeast, where a large proportion of
homes are heated with oil, which has gone from, say, $2 per gallon to
$4, and is normally bought in 300 gallon or larger tank loads.
Depending on the size, age and heat leakiness of the house; the
efficiency of the burner; outside temperatures; whether people are home
by day; and the occupants' tolerance for cold (among other factors), a
home might use a tankload every few weeks or a month. We talk alot about the gas mileage our cars get, but I've heard little about houses' days per gallon.
By Thanksgiving, most northeasterners will have paid for at least one
delivery of heating oil, and will be facing concerns about how they
will cover the much higher costs this winter will bring. Their Christmas purchases may look very different from those of prior years.
By Thanksgiving, we should know who has won the election, and perhaps who the cabinet officers are going to be in the next administration.
PostScript: This Gallons Per Day measure probably needs to be specified in terms of Gallons Per Day at 30 degrees -- let's call it GPD30 -- GPD40, GPD20, GPD10 , etc.